April 22, 2014

North Carolina Supreme Court Rules on Various Land Use Matters

The Supreme Court of North Carolina has issued a few decisions in the past sixty days with bearing on land use matters.  That the Supreme Court would rule this much in this little time on land use issues is not unprecedented, but it is unusual.  We'd like to briefly cover the crux of these decisions. 

"OK, ok, wait your turn!  I think the water rights people are up next."

Off we go!

I.  Conditions on Department of Transportation Driveway Permits

In High Rock Lake Partners, LLC v. North Carolina Department of Transportation, the Supreme Court determined that the NCDOT exceeded its statutory authority when it placed certain conditions on a residential developer's driveway permit.  The "driveway" was planned to connect a proposed residential subdivision development to a state road, over a railroad crossing. 

Specifically, the Supreme Court invalidated the NCDOT's conditions that the residential developer would need to (1) increase "grade" at an existing railroad crossing, meaning the developer would need to build a bridge over or dig a tunnel under the railroad crossing and (2) obtain the approval of the railroad companies owning and operating the crossing for the "grade change". 

In striking the NCDOT driveway permit conditions, the Supreme Court's analysis takes a literal and arguably restrictive view of the Department's powers pursuant to NCGS 136-18(29), the "Driveway Permit Statute": "This statute authorizes DOT to require applicants to construct and dedicate to the public use certain improvements in exchange for driveway access to, inter alia, secondary roads that average at least 4,000 cars per day. Those improvements are acceleration and deceleration lanes, traffic storage lanes, and medians. The statute additionally empowers DOT to establish policies and adopt rules that regulate the size, location, direction of traffic flow, and construction of connections of a private driveway to a public road. The terms of the statute authorize no further DOT regulation of driveway connections and do not permit the denial of reasonable access to the public highway system."

II.  Riparian Rights and Inverse Condemnation

In L&S Water Power, Inc. v. Piedmont Triad Regional Water Authority, downstream plaintiff hydroelectric power plants claimed inverse condemnation against upstream defendant public water authority over the diversion of water from the Deep River basin. 

Plaintiff claimed that the upstream diversion by the public water company--which, it should be said, was done to "satisfy its projected water demand for the next 50 years or more"--decreased downstream flow and amounted to a taking of plaintiff's riparian rights.  Defendant claims the "reasonable use" doctrine insulates it from liability and, in any event, the State impoundment statutes and North Carolina Environmental Management Commission certificate ("EMC certificate") also protect .

The North Carolina Court of Appeals found in favor of the plaintiffs and determined a taking had taken place, requiring the payment of compensation.  The Court of Appeals held that (1) the "reasonable use" doctrine does not apply to inverse condemnation proceedings, like this one, and (2) nothing in the impoundment statutes or in the EMC certificate excuses a government from paying just compensation.  The Supreme Court affirmed in a per curiam opinion.

III.  Loan Foreclosures and Deficiency Lawsuits

In Blue Ridge Savings Bank, Inc. v. Mitchell, plaintiff filed suit to recover on a loan deficiency.  Plaintiff loaned defendants $130,000, secured by certain property.  Defendants defaulted on the promissory note, at which point plaintiff foreclosed and purchased the property at public sale for $100,000, leaving a $30,000 deficiency.  Defendant fended plaintiff's attempt to recover the deficiency amount on the basis that plaintiff's $100,000 bid was "substantially less than the property's true value" in violation of NCGS 45-21.36.

Distinguishing Supreme Court precedent that a 20% difference between appraised value and sale price triggers the protections of NCGS 45-21.36, the Court of Appeals determined that the 9% difference between appraisal and sale price is not "substantially less" than true value.  The Supreme Court affirmed in a per curiam opinion.

A 9% profit margin isn't bad on real estate, is it?

Copyright © 2014 Womble Carlyle Sandridge & Rice, PLLC. All Rights Reserved.

About the Author

Michael C Thelen, Womble Carlyle Firm, Litigation Attorney

Mike represents myriad clients – from Fortune 500® companies to smaller, privately-owned organizations – in cross sections of business throughout the many stages of federal and state litigation.  From his years of practice in New York and North Carolina, Mike primarily has experience in the areas of land use, local/municipal government law and real estate litigation, having handled zoning, development agreement, land use planning, eminent domain and condemnation, construction, retail and commercial landlord-tenant, partnership dissolution, state law torts, and civil...


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